What is the SDX™ Protocol?

The Shareholder-Director Exchange Protocol (SDX Protocol) was created by a working group of leading independent directors and representatives from some of the largest and most influential long-term institutional investors. The group came together to provide guidance to other investors and directors about the growing trend towards shareholder director engagement. The 10-point SDX Protocol offers guidance to public company boards and shareholders on when such engagement is appropriate, and how to make these engagements valuable and effective

The Protocol
  • 1

    Scope of the SDX Protocol

    • Focuses on real-time, two-way interactions between non-executive directors of public company issuers and representatives from long-term institutional investors such as asset managers and public pension funds.
    • Supplements management’s investment relations efforts
  • 2

    Adopting a clear policy for engagement

    • Each company and institutional investor will develop a clear policy for how it will approach shareholder-director engagement.
    • In determining whether to make or accept an engagement request, companies and investors will make each decision on a case-by-case basis.
  • 3

    Identifying engagement topics

    Topics appropriate for shareholder-director engagement include governance related topics for which the company board is directly responsible. Some specific examples are set forth below. The decision to engage directly with investors should be made in consultation with or at the request of management, including discussing with management the purpose of the engagement, topics for discussion, and preparation.


  • 4

    Requesting engagement

    Companies and investors will establish a primary contact for receiving engagement requests:

    • For companies, in most cases, likely the corporate secretary.
    • For investors, given the variety of ways investment firms are structured, the contact will vary.
  • 5

    Selecting participants

    • Participating institutions often select two or more individuals to represent them (based upon topics to be discussed).
    • To the extent practicable, subsequent engagements will involve the same personnel in order to preserve continuity.
  • 6

    Determining how to engage

    • Directors and institutional investors generally prefer meetings where one company meets with one investor. These meetings may be in person or virtual (e.g., teleconferences, web-based meetings).
    • Group meetings may also be successful and are sometimes preferred (e.g., investors might attend a board committee meeting or strategy retreat, a focused investor day, etc.)
  • 7

    Preparing for the engagement

    • Companies and investors will prepare for meetings by reviewing relevant materials concerning the institution and individuals with whom they will engage (e.g., corporate governance guidelines, proxy voting policy) and the topics to be discussed. Engagement participants will be given appropriate training on relevant legal issues. Prior to the meeting, engaging parties will agree on the following:


  • 8

    Participating in the engagement

    • Parties will agree to specific next steps resulting from the discussion and to communicate information about the engagement to board, management, or investor colleagues who were not present.
    • Changing either company or investor policy or practice is not essential for a successful engagement; however, an important element is each party’s willingness to listen carefully to one another and to take action in response to valid concerns or explain the reasons why the party is not taking action.
  • 9

    Reviewing and revising approaches to engagement

    • Investors and companies will review engagements annually and revise as necessary.
    • Likewise, the SDX Protocol will be reviewed annually and updated as appropriate to reflect experience and emerging practice.
  • 10

    Customizing the SDX Protocol

    • Parties should use their judgment and modify engagement practices as needed.